Monday, August 24, 2015

Having spent the last couple of years reading and thinking about energy and the economy, this is what I have learned: A primary energy source needs to fuel enough economic activity to pay for its own production (I think this is a self-evident statement, but correct me if I am wrong). This is how the laws of thermodynamics trump the law of supply and demand, which will not save us from low commodity prices in the end. The maximum prices possible for primary energy sources like oil, coal and gas are constrained by their energy content, which remains fixed by their chemical structures. Unfortunately, nonrenewable natural resources are also subject to depletion and hence diminishing returns as a result of rising production costs, which means they become less and less valuable to the economy over time (more and more economic resources are diverted into their extraction rather than doing the things people actually want). As of September 2015, we are at the point in history where none of the energy sources which have enabled industrial civilization are able to drive enough economic activity to pay for themselves any longer. Therefore, commodity prices are crashing and the collapse of industrial civilization will soon follow. Deflationary collapse is the logical endpoint of civilization and appears to be underway now.

However, at this point I want to forget about all the futilitarianism promoted by Gail Tverberg and turn to the proverb, "while there's life there's hope." And by "life," I mean as long as the operational fabric of industrial civilization is intact, still allowing us to do anything possible with modern technology. There is plenty of wastefulness in the system that we theoretically could get rid of without breaking everything, if we only learn to do things more efficiently.

Think of deflationary collapse as a terminal illness we have all just been diagnosed with, and Bitcoin XT as one experimental treatment. No one knows it if will really work, but it is worth a shot. The weakest link in our civilization -- and the part capable of bringing it down the fastest short of nuclear war -- is the banking system, which is precisely what Bitcoin XT seeks to remedy. Bitcoin XT can help make civilization more resilient and more resistant to authoritarianism at the same time. Let us use Bitcoin to disintermediate the banks and take control over our finances. Quit paying bank fees. Buy, sell and save with no third party involved. Keep your assets safe from risk of seizure by governments or other entities. This will work as long as the Internet remains in existence, which is a big unknown, but at least I don't see what we have to lose by converting our other moribund virtual assets to this much more resilient one. If we are lucky, Bitcoin can help our whole civilization last longer because our infrastructure becomes more resilient to financial crises.

Now Bitcoin needs your help against misguided forces who try to stunt its growth and subvert it for their purposes. Most of the so-called core developers (but not the larger Bitcoin community) are fanatically opposed to bigger blocks, while being horribly ignorant of how urgently we need an alternative to the established financial system. The villains include Peter Todd, Adam Back, Luke-Jr, Wladimir van der Laan (who has counterproposed a ridiculously slow growth scheme instead) and even Nick Szabo. They basically want Bitcoin to remain so small that it can only be used as a settlement system among banks and a few individuals willing to pay high fees, which will ensure that Bitcoin sinks with the banking system. Read Mike Hearn's summary if you are unfamiliar with the block size war:

The solution is a hard fork which can be accomplished by using Bitcoin XT (or any Bitcoin client implementing the changes described in BIP 101), created by Mike Hearn and Gavin Andresen (the actually change will happen in January 2016 at the earliest, and only if 75% of the last 1000 blocks get mined according to the updated protocol). This will enable Bitcoin to scale up so the world can actually use it to handle a significant portion of payments. Currently, Bitcoin is limited to one-megabyte blocks (at the rate of one block about every ten minutes), which amounts to roughly three transactions per second at most. Bitcoin XT will give us the ability to produce eight-megabyte blocks in 2016, and then this limit will double smoothly every two years for twenty years, which should be enough for all of Bitcoin's future growth.

Watch the progress of Bitcoin XT here and download the version for your operating system:

Running a full node is easy even for completely ordinary computer users with no technical knowledge. Most likely, all you have to do is install Bitcoin XT and keep it running. You can also use it as a wallet, of course. Just make sure you have enough storage space on the drive where you want to put the Bitcoin data directory (which you get to select at first startup). So far, the blockchain occupies 47.3 GB on my disk, so you need all that plus room to grow. Or if you don't feel like keeping the whole blockchain, you can enable pruning, but I don't recommend it. Storage is so cheap, we can all keep the whole blockchain for a very long time. It will take years before it will even fill up the smallest hard drive you can buy new (which is currently 320 GB, I think). You might as well dedicate an entire hard disk or SSD to Bitcoin right now and leave it running for years without having to upgrade.

If Bitcoin is hogging to much upstream bandwidth, just adjust the QoS settings in your router. Also, in order to have a reachable node (which is not absolutely needed, but good for the network) you need to make sure port 8333 is open. It should open automatically using UPnP, but if it doesn't, you need to open it manually. You can tell if you have a reachable node by the number of connection you are getting; anything over 8 means your node is functioning correctly (which is easily determined by hovering your mouse in the lower right corner of your XT client). You can also check if your node is reachable on the Bitnodes website.

I urge everybody to run an XT node. If you encounter any problems setting it up, just ask and I will guide you through it. Ideally we should also be mining with XT, but that is much more costly. Let us just get the nodes running for now to signal our support of XT and be ready to use the forked version of Bitcoin. Running a full node is a powerful feeling, because it means you validate and store every Bitcoin transaction on your computer. It also gives you complete control over your own bitcoins with the most superior wallet, and you do your small part to maybe save our civilization from deflationary collapse. As Gandhi said, “Whatever you do will be insignificant, but it is very important that you do it.”